Redfern to rival Pyrmont as a hub for media

By Carolyn Cummins Commercial Property Editor

REDFERN'S commercial property sector is being expanded with the $200 million development 8 Central Avenue, being undertaken by Rebel Property Group and the Seven Network.

This project is indicative of the growth in the city fringe areas, which is expected to remain strong, despite the weaker outlook for the general commercial property market.

When completed the area will rival that of Pyrmont as a media hub.

The headquarters for Seven, the ABC, Network 10 and Fairfax Media, publisher of the Herald, will remain at Pyrmont. The Nine Network was to move from Willoughby to Moore Park, but changed its mind at the last minute.

Moving to the suburbs and the city fringe is becoming more popular as employers pay lower rents, while giving staff more amenities such as car parking and campus-style, relaxed office space.

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The 8 Central Avenue development is 38,000 square metres of net lettable area and comprises an 11-storey media and office complex. The 12,000 sqm of space on the top four floors are now being pre-leased through CB Richard Ellis and Chesterton International.

On completion of the project in early 2010, the rent will be $400 a square metre. Construction is now underway through Watpac Constructions. The anchor tenants, Seven Network, Global Television and Pacific Magazines, will lease in total 25,000 sqm, over the first seven levels of the building, for production studios and offices.

The principal of Rebel, Allen Linz, said the development was already receiving strong interest from a range of media and non-media companies keen to secure large floor plates only 10 minutes from the city and airport by car or public transport.

Research by CBRE has shown that there is a great deal of commercial and residential activity in Redfern. There is an influx of creative services groups and a range of community facilities being developed or re-furbished by the NSW Government and City of Sydney council.

These works include the planned upgrade of Redfern railway station, the 180,000 sqm North Eveleigh redevelopment, the $20 million upgrade of Redfern Oval on Elizabeth Street and the redevelopment of Souths Leagues Club.

CBRE's Oliver Freed said data showed rents were expected to increase 20 per cent over the next year, while prices would show similar growth, as the area continued to be good value compared with other business parks around Sydney.

"The low vacancy rate and rising rents in the CBD have been positive for the suburban and fringe office markets. Many tenants now want to move out of the CBD or move their back office operations to areas like Redfern," Mr Freed said.

In its latest report, CBRE said that across the Sydney metropolitan area there was about 789,000 sqm of suburban office space that was forecast to enter the market from 115 projects. The bulk of that new supply was concentrated in the city fringe region, which represented 30.7 per cent of total supply.

James Wish, of Chesterton International, said that Redfern's commercial property sector had lagged behind the strong price and leasing growth of other city fringe areas, but that was changing with projects such as the Australian Technology Park, which covered about 14 hectares and had more than 1000 people working for a range of organisations from government departments to small computer graphics operators.

The park continues to attract blue-chip tenants, including the Defence Department, the University of Sydney, Hewlett-Packard and Johnson & Johnson.

Seven will be moving from its current facilities at Epping, allowing for the redevelopment of the precinct, while Global will be moving from North Ryde and Pacific Magazines from Milsons Point.

CBRE's Paul Salsano said the report showed that vacancies were also declining in the traditional media area of Pyrmont-Ultimo, hitting an all-time low of 2.8 per cent.

"The fringe of the city has been particularly attractive to larger tenants requiring in excess of 500 sqm of space," Mr Salsano said.

He said competitive rentals were one of the key drawcards for tenants reviewing projects in the city fringe market.

Indicative rents for new space in the Pyrmont-Ultimo area ranged from $450 to $525 gross per sqm, which was significantly below comparable space in the CBD.

The increased tenant demand is being capitalised on by developers such as FKP Property Group, which is in the process of redeveloping the former Crystal House building in Ultimo as The Hub on Harris.

CB Richard Ellis and Tim Green Commercial have been appointed to lease the 2800-sqm project on the corner of Harris and Macarthur streets.

North of the city there has also been a rise in demand for space at St Leonards, Colliers International says.

Tim Fox, executive of investment sales at Colliers International, said he was already seeing the start of overflow movement into the St Leonards area as the high absorption of space in North Sydney pushed up rents and left limited options particularly for smaller tenants.

"There have been three sub-$15 million transactions since the start of 2008 which is on par with 2007 which also had three transactions at this time. I think the increasing demand out of North Sydney combined with the relative value of the market for cashed up private investors will mean activity remains on par this year," Mr Fox said.

"Our records show that 12 freehold commercial transactions were completed in St Leonards in 2007, ranging in price from $1.75 million to $24.5 million, with rates ranging from $3274 sqm to $5307 sqm. This year has seen three sales made in the area." Mr Fox said this included one sale made to an owner-occupier for $3.65 million at 67-69 Nicholson Street. Rates for these sales have ranged from $3900 a sqm to $5954 a sqm.